Lagarde has pointed out that “keep interest rates at restrictive levels over time will reduce inflation by curbing demand and it will also protect against the risk of a persistent increase in inflation expectations.”
“Our future policy rate decisions will continue to rely on data and a meeting-by-meeting approach“, he has qualified.
In regards to working market, considers that “wages are growing fastersupported by strong employment dynamics, and the main theme in wage negotiations is how wages can catch up with high inflation“.
“Although most measures of inflation expectations in the longer term are currently around 2%, these measures warrant continued monitoring“, has added.
Lagarde added that although confidence indicators are rising and energy prices are down, economic activity will remain weak in the near term.
The European Union has an inflation target of 2% per year. However, the YoY inflation in European countries that adhere to the common currency, it is still at record levels, despite having fallen for the third consecutive month and closed at 8.5% in Januarysupported by a slowdown in energy prices. In 2022 it had closed at 9.2% per year.
Since the acceleration in prices began, triggered by the pandemic that caused imbalances in the production chains and fueled by the war in Ukraine that put particular pressure on food and energy, the European monetary entity chose to apply violent increases in its interest rate. interest.
He ECB applied its latest rate hike in early February in 0.50 percentage pointsjust as he had done in December, and took them to the range of 2.5% and 3.5%. Lagarde, had anticipated that, contrary to what was expected, the same decision will not be made in March.
He range where European rates currently stand is the highest since November 2008.
What is expected for 2023
The economy of European Union (EU) In 2023, it will have slightly better-than-expected growth and moderate inflation, narrowly escaping a recessive picture, the European Commission announced this week.
In his report with the projections for the economic performance of the bloc, the Commission said that the economic performance of the eurozone this year will be 0.9%. This represents an improvement of 0.6 percentage point from their previous report.
Simultaneously, lowered its projection of inflation in the euro area for 2023 to 5.6% and considered that the maximum limit of the trend had already been exceeded, due to the deceleration registered in energy prices.
Source: Ambito
